News | Wednesday, 18 March 2009

Rent Reform Bill ‘still far from acceptable’ - GRTU

The General Retailers and Traders Union (GRTU) Monday presented its final recommendations on the Rent Reform Bill to Minister for Social Policy John Dalli, the Leader of the Opposition and the Members of Parliament during a press conference.
GRTU Director-General Vince Farrugia, who is also a candidate for the MEP elections under the PN ticket said that the union considers business property ownership as one important store of wealth that accumulates from the earnings of an economic activity in the form of enterprise. An enterprise is very important for both the Maltese and European economy – “the backbone of our economy”- and Government must promote and defend enterprise in line with the Small Business Act, Farrugia said. On these lines, GRTU has felt the need to once again raise the proposals it deems are essential especially in times when closing of enterprises and job losses are something we do not need.
One of GRTU’s major objections on the Bill is on the validity of contracts. GRTU sustains that where pre-June 1995 contracts are clear and contain all the essential elements to make a contract binding, independently of whether a contract is definite or not, it must be still regarded as a valid contract, unbreakable especially by a third party.
GRTU’s legal advisor – Jan Karl Farrugia, said that tt is unacceptable that the legislator, in this case a third party, interferes and intervenes between the contractual obligations reached between the two parties based on existing contractual obligations reached within the framework of existing laws. The contracts were signed by both parties knowingly, the majority in the presence of Notaries or Lawyers in their professional capacity. In the same way, a purchase contract is not broken when the purchased item increases in value, a lease contact is not broken because the value of the property increases.
The Rent Bill also establishes a 15 per cent annual increase of rent up till 2012, after which the rent must be renegotiated with the landlord. GRTU does not agree with this proposal either, as it deems acceptable that a blanket approach is adopted for the increase in rent. Rent cannot increase in the same manner for all tenants, GRTU officials said. No justification for the choice of 15 per cent was given and no impact assessment was carried out. Cases are common were a significant sum of money was paid to the landlord for him to agree not to increase the rent or to ascertain length of lease term.
In addition, the union deems 2013 as too early to expect businesses to adjust to what might be a drastic change in the rent they pay. It appealed for a longer transition period, both for the rent to start to increase and for the tenant to be thrown to the mercy of the landlord.
Taken into consideration should also be the original cost of construction or purchase value of the building and the returns enjoyed by the property owner, the GRTU said, as rents and other remuneration and premiums are paid over the years by the tenant for privileges granted under the same lease arrangement, as well as the structural improvements carried out.
As to inheritance of lease, the GRTU feels Malta has little, if any, supportive schemes for the succession of family owned private businesses by members of the same family or by others. The principle of succession of businesses in rented properties should be recognised and members of the family of the tenants or others nominated by the tenants as successors should be given the necessary safeguards so that the enterprise will continue to survive.
Change of Use is another aspect GRTU feels the Bill should be more versed to the current economic situation. Economic changes are necessitating the change of genre for old established enterprises. The tenant should be given the opportunity of change of use from that stipulated in the contact if this does not jeopardise the landlord. Should the Rent Board find, after hearing both parties, that there is no reason to stop the tenant from applying for change of use this will be granted to the tenant.
GRTU on the other hand particularly agrees with the Bill’s Non Uso clause were a tenant who chooses to pay the rent regularly but does not operate his enterprise is hindering other enterprises form establishing their enterprise in those premises, sometimes prime locations. This of course does not include closure for a period due to works that need to be carried out in the establishment.
GRTU also feels that certain important aspects were not considered or at least not sufficiently in the Bill. The use of Government property for instance should still be used as a tool of assistance to enterprise, including preferential rental treatment, within the framework of an agreed small business promotion strategy.
The union also called for the inclusion of incentives and options that give the possibility of a safe landing to those enterprises that will be very negatively hit by the reform. This would be done by giving the tenants an option to buy the property on favourable terms and get credit for the number of years the property has been occupied together with the credits for the value of the investments done in the property. These should together obtain a maximum discount on the market value of the property of up to 50 per cent. This option would apply irrespectively of whether the rented property is privately owned or Government


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18 March 2009

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